Why Privatizing Public Transport Does Not Work

I spent some time today with the nice instructors and students at the Fontys University of Applied Sciences in Venlo, in the south of the Netherlands. For several years already, the university has standardized all their Java courses, assignments, and exams to be done through the free and open source NetBeans IDE, thanks to its out of the box support for, in particular, Ant based projects. I went through the freely available "What's New in NetBeans IDE 7.3" slide deck while focusing, of course, on the many new HTML5 capabilities in the IDE.

On the train journey back, I was reminded of how privatizing public transport does not work:

  • In the morning, in Amsterdam, I had bought a return ticket from Amsterdam to Venlo. On the return journey, at the station in Venlo, I found that there were several blockages and delays in the train route I would normally have taken from Venlo back to Amsterdam. But, guess what? The alternative route I had to take included a section (from Venlo to Roermond) operated by Veolia Transport. "So what?", you might be thinking. Well think about this... I was not able to use the return ticket I had bought that morning in Amsterdam. It was not a valid ticket for Veolia. Instead, I had to buy a new ticket from Venlo to Roermond, operated by Veolia, after which I could use my original ticket from Roermond to Amsterdam.

  • This reminded me of a very similar occurrence at Schiphol airport in Amsterdam. Imagine you're a tourist and you arrive at Schiphol and you want to catch the train to Amsterdam central station. There are several automated sale points all over Schiphol, where you can buy your ticket. The first question you get when you press a button, or even before that, on the automated sale point is: "Do you want to travel with NS or with Fyra?" The latter is Fyra, yet another transportation company (famous for mess ups with the new connection between Holland and Belgium), while the former is the Dutch national train service, i.e., the government controled train service, the one that brought me from Amsterdam to Venlo and then from Roermond to Amsterdam. But, if you're a tourist freshly arrived at Schiphol, how on earth are you supposed to make a decision about whether to get to Amsterdam central station via the NS or Fyra? All you want to do is get there, you don't want to choose which of the two services to use, despite the fact that exactly that is supposed to be wonderful "because now we're giving freedom and choice to train travelers everywhere", especially since the whole trip takes about 10 minutes, so how much value can one service have over another? And even more especially since you're given no clue whatsoever about how you're meant to make that choice.

But, worse than the two examples above is the fact that it doesn't make any difference to any of these services that these ludicrous situations take place. It makes no difference to them. Why? Because the cost of the above problems is low to passengers, including me. E.g., I only had to pay 2.70 EUR for my trip between Venlo and Roermond, while the discomfort of tourists at Schiphol is also not very high. Neither the tourists nor me myself are going to get extremely upset, just slightly annoyed, in the greater scheme of things.

So, the cost of fixing the problem (i.e., coming up with shared protocols, for example) is higher than the cost of the inconveniences described above. And that's the REAL reason why privatizing public transport does not work. 

Comments:

It sounds like the core problem you ran into isn't necessarily privatization of mass transit systems, but rather the disconnect between the various rail companies in that part of Europe; the disconnect being honoring tickets between companies. It's like they are on different networks.

Here in the States, we only have very few passenger railroads. However, Amtrak does have contracts to run on many railways, including freight lines.

Combine heavy rail with the various light rail systems in many cities, you get a royal pain in the back side. It's a similar situation to yours.

Posted by guest on March 06, 2013 at 01:54 PM PST #

But would that "disconnect between the various rail companies in that part of Europe" exist if mass transit had not been privatized? I don't see a single benefit that privatization has brought in this sector. Mass transit services have certainly not improved, in any way at all. Rather, they've become fragmented, disjointed, and -- as in the scenarios I've pointed out above -- pretty ridiculous and cumbersome.

Note that I'm not arguing against privatization in general. But what I am saying is that the disconnect between the various rail companies is not something that is going to be solved, ever. The reason -- as I pointed out above -- is that the cost of solving the problem is greater than the cost currently being incurred by the problem that could be solved if cost wasn't the primary driving force of companies partaking in privatized sectors.

Sooner or later we're also going to have privatized roads, I'm sure of it, you heard it here first. Any pain being experienced by users of toll roads today is going to be magnified when all roads are privatized and various companies each own disconnected roads, with their own rules, and conflicting payment systems. Next up will be parks, libraries, sidewalks, and -- at some stage -- the air we breathe as well. And it will all be marketed under the banner of "because now we're giving freedom and choice" and "now you have a choice in selecting the quality of air that you breathe".

Posted by Geertjan on March 06, 2013 at 02:47 PM PST #

Geertjan, it's a complex thing. In Italy the situation is a total mess, as you probably hear in the media, and privatizations have been incomplete and partial. Only recently we have started with two different companies providing high-speed connections. This is bringing down prices, at the same time there's an increase in problems because we never had the problem of co-ordinating the allocation of rolling stocks from two different owners. Should it work or not, you have to wait for some time. What I can say is that the main operator, that was the former public company, is a disaster and started to be a disaster well before the privatization.

The problem about the ticket is easy to solve with a good policy of refunds, or with a different payment system. For instance, we all know that newspapers will be more and more on the web, and payment based. At the moment it's very stupid to subscribe to a single newspaper, since to be honestly informed you need to read many. But it would be very expensive to subscribe to many different newspapers; plus, often you're brought to an article by a link and you could be interested to read just a few articles for a given newspaper in a year. What I've seen announced is a debit-based service, for which you pay e.g. 50 $/€ and allows access to multiple newspapers, consuming some reading rights. Let's give the thing more time.

Posted by Fabrizio Giudici on March 06, 2013 at 04:28 PM PST #

All major highways are still publicly maintained, even in the U.S. The various counties, cities, or states through which the highway runs can contract out the work to companies (public or private). But, the contractors still are funded by said political entity. A prime example is the Interstate Highway System.

Even some of the various dirt county roads in the Midwest are still public.

The various subdivisions here in my city do have privately owned roads that directly connect to the public ones, but they are required to upkeep them or face hefty fines/massive protest from the citizenry.

After the last massive snowstorm, public safety pretty much had precedence everywhere (even on private ones).

Look at cell sites though. Wireless companies pay the land owners; they actually lease it from the owners.

Posted by Derek Witt on March 07, 2013 at 01:30 AM PST #

Most major highways in the US are publicly funded by whichever political entity they run through at any given location. The construction/maintenance can be contracted out to private companies though.

Many turnpikes are privately owned and maintained. But, if they carry Interstate Highways, they cannot let up on maintenance. There would be major public outcry if that happened.

To your point, not all privately owned/maintained roads are the same. The toll roads are a good example. The Kansas Turnpike is one of the best in terms of maintenance. There have been proposals in Missouri to make I-70 a toll road. 70 in Missouri has been in a sad state for years now.

Posted by guest on March 07, 2013 at 01:49 AM PST #

Maybe you can privatize and then regulate and coordinate it? Say the Prague regional transport is operated by many different companies (Prague itself is operated by a publicly owned company), but you can use a single ticket for all of them. They somehow distribute the money between themselves. Similarly the timetables are in a single format in a single place.

The problem with public companies is that it is often a good place for corrupt but incompetent politicians to get easy money for doing nothing or worse doing sometime they do not understand.

Posted by guest on March 07, 2013 at 12:58 PM PST #

". . . the cost of fixing the problem . . . is higher than the cost of the inconveniences described above"

Looks like you're proving that privatizing public transport works just fine, actually. (in my experiences with city-run transport, I suspect you would have had to by another ticket even under a government run system, assuming the alternate route was even available)

Posted by guest on March 07, 2013 at 07:04 PM PST #

The concept of time zones (how we Java folks love those!) has its roots in the railroad.

In the U.S. in the early 19th Century, there was no standard time. Each station very often had times that could vary by several minutes (even in the same state). I'm pretty certain, stations elsewhere had this same problem.

It's very similar to the ticket problem. I guess the saying "my way or the highway" applies here too.

Posted by Derek Witt on March 08, 2013 at 12:57 PM PST #

The whole discussion about privatization versus public hands of public transport is far from easy. In Europe in a lot of countries governments got involved in all countries up to some level to getting the rail network developed! In the Netherlands this was all not that much different. Some of these state owned companies have turned into large companies with to many and sometimes overpaid employees, making to much loss and needing money from the government to keep going.

While its true in the United States rail traffic survives. So many branch lines and stations have been closed. The big players keep getting bigger and bigger and a lot of smaller players have come up recently operating small closed down branch lines. For information look up Conrail (I think it was called) was created by the US congress to keep the total rail network from falling apart. For passenger traffic Amtrak got started.

Having the government as a stakeholder in a rail company can be both good and bad. But one thing that has to an extent also lead to the railway companies loosing money and closing lines was the ever expanding road network.

In in the Netherlands, no matter how weird it may sound. A lot of railway lines are loaded (to much traffic). This is also duo to stupid way its currently being planned the trains and partly how railway signals are used. But over the last 50 to 60 years road traffic has received in general a gigantic investment done by governments.

On top of that over the last 10 15 years railways had been required to cut back further spending. The result in the Netherlands was simply bad. We went from having a not to bad operated railsystem with a not to bad price tag to one with underinvestment. Switches in the track being taken out. Rolling stock getting less maintenance.
As a commission setup before the railway system was set to be privatized. They warned that companies should not start cutting back on spending, just to safe money. Now with 1 inch of snow our railsystem almost crawls to hold! And yes it can and must do way better.

So the collapse of the amount of passengers and freight traffic is not just in bad policies at the railway companies them self's.
Also what we are now saying in the freight sector in Europe is that we don't have to hold out breath for competition in the coming years.
Just recently the European Commission had to approve the merger between the Deutsche Bahn and Arriva (private public tranport operator).
There are not going to be small players in the market just bigger and bigger companies.
With some public transport tenders (while it may not suppose to be happening) some big companies are putting in offers at LOWER prices to keep smaller players out the public tender market.

So the whole drive to privatize the public transport market will in the end lead to more fragmented public transport system. Less players even in the market then we have today at all in private hands. Is in private hands a problem ? Not really but if you have little or nobody to choose from a government...

Roderick Klein

Posted by Roderick Klein on March 17, 2013 at 03:45 PM PDT #

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About

Geertjan Wielenga (@geertjanw) is a Principal Product Manager in the Oracle Developer Tools group living & working in Amsterdam. He is a Java technology enthusiast, evangelist, trainer, speaker, and writer. He blogs here daily.

The focus of this blog is mostly on NetBeans (a development tool primarily for Java programmers), with an occasional reference to NetBeans, and sometimes diverging to topics relating to NetBeans. And then there are days when NetBeans is mentioned, just for a change.

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